SENATE 


62d  Congress'! 
2d  Session  j 


/ Document 
I No.  881 


THE  PANAMA  CANAL  and 
RESTORATION  OF  AMERICAN 
MERCHANT  MARINE 


AN  ADDRESS 

DELIVERED 


BEFORE  THE  AMERICAN  SUPPLY  AND  MACHINERY  MANUFACTURERS’ 
ASSOCIATION  AT  ITS  ANNUAL  MEETING  HELD  IN  NORFOLK,  VA., 
MAY  14.  1912,  BY  MR.  SAMUEL  H.  BARKER.  OF  PHILA- 
DELPHIA, PA..  FINANCIAL  EDITOR  OF 
THE  NORTH  AMERICAN 


PRESENTED  BY  MR.  O’GORMAN 
July  20,  1912. — Ordered  to  be  printed 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 
I9!2 


ft 

THE  PANAMA  CANAL  AND  RESTORATION  OF 
AMERICAN  MERCHANT  MARINE. 


r \n  address  delivered  before  the  American  Supply  and  Machinery  Manufacturers’  Association,  at  its  annual 
meeting  held  in  Norfolk,  Va.,  May  14,  1912,  by  Mr.  Samuel  H.  Barker,  Philadelphia,  Pa.,  financial 
editor  of  the  North  American.] 


.U- 

60 


1 


American  enterprise  is  about  completing  the  greatest  engineering 
feat  which  man  has  known.  Next  year  the  Panama  Canal  will  be 
opened  to  commerce.  That  will  be  a world  event.  Bound  up  in  it 
are  almost  incalculable  possibilities.  They  fairly  stagger  imagination. 
How  they  shall  be  availed  of  and  how  turned  to  our  best  account 
becomes  now  a matter  of  utmost,  of  pressing  importance. 

For  the  construction  of  this  great  isthmian  waterway  the  American 
people,  through  their  National  Government,  will  have  expended  some 
$375,000,000.  That  is  just  about  three  times  the  capital  cost  of  the 
Suez'  Canal,  which  is  the  world’s  other  great  artificial  isthmian  ship- 
way. Toward  the  Panama  Canal  other  countries  have  contributed 
nothing  that  the  American  people  have  not  paid  for  in  hard  cash. 

It  is  an  American  project  in  which  the  American  people  have  made 
a huge  investment.  While  this  has  not  all  been  capitalized  and  while 
$84,631,980  of  the  $134,631,980  of  Panama  Canal  bonds  so  far  issued 
by  the  United  States  bear  only  2 per  cent  interest,  the  others  paying 
3 per  cent,  it  is  fair  to  calculate  that  31  per  cent  per  annum  no  more 
than  meets  the  interest  and  sinking  fund  cost  of  the  capital  invest- 
ment. 

On  this  basis  the  American  people,  having  invested  $375,000,000 
in  the  Panama  Canal,  will  be  under  an  annual  charge  on  account  of  it 
of  $12,187,500.  In  addition  to  this,  the  canal  must  be  operated  and 
maintained.  It  cost  $3,857,405  to  operate  and  maintain  the  Suez 
Canal  for  1910.  Such  a cost  in  the  case  of  the  Panama  Canal  would 
make  it  an  annual  charge  on  the  American  people  of  $16,045,000. 

Com])leted  and  in  operation,  the  Panama  Canal  will  be  the  greatest 
factor  in  world  commerce  that  has  been  introduced  since  the  Suez 
‘Canal  came  into  use.  It  will  save  8,415  miles  on  the  present  ocean 
voyage  from  New  York  to  Pacific  coast  ports  north  of  Panama. 
From  our  north  Atlantic  ports  to  points  on  the  west  coast  of  South 
America  it  will  reduce  the  voyage  distance  by  about  5,()()()  miles  on 
an  average.  • 

From  Europe,  the  Panama  Canal  will  save  6, ()()()  miles  on  the 
present  sailing  distance  to  our  Pacific  coast  ports  and  2,600  miles  to 
points  on  the  west  coast  of  South  America.  It  saves  nothing  on  the 
wSuez  route  from  Euro])e  to  Asia  and  Australia,  but  from  New  York 
it  will  shorten  the  voyage  to  Hongkong  by  89  miles;  to  Shanghai,  by 
1,629  miles;  to  Melbourne,  by  2,656  miles,  and  to  Yokohama,  by 
3,729  miles. 


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PANAMA  CANAL  AND  AMEKIOAN  MERCHANT  MARINE. 


The  economic  importance  of  the  Panama  Canal  is  thus  obvious. 
But  its  advantages  for  the  United  States  are  largely  on  paper  and  of 
only  potential  value  unless  we  have  ships  to  make  use  of  them. 
Under  present  conditions  European  and  Japanese  shipowners  will 
reap  substantially  all  of  the  huge  benefit  to  be  derived  from  the 
Panama  Canal — itself  entirely  an  American  work. 

Yet  the  isthmian  waterway,  which  will  have  cost  the  United  States 
$375,000,000  to  create  and  which  will  cost  about  $16,000,000  a year  to 
carry  and  maintain,  can  be  made  to  pay  -for  itself  many  times  over. 
It  offers  an  effective  means  to  restore  the  American  merchant  marine 
to  its  rightful  place  on  the  high  seas. 

As  a nation  we  are  paying  very  dearly  for  having  permitted  Ameri- 
can ships  to  be  driven  almost  entirely  out  of  international  trade.  For 
the  fiscal  year  1911  American  ships  carried  only  10.2  per  cent  of  the 
imports  to  the  United  States  brought  by  sea.  They  carried  only  7.5 
per  cent  of  our  exports  going  by  sea.  American  ships  carried  only 
$280,206,464  or  8.7  per  cent  of  the  total  sea-borne  commerce  of  the 
country,  which  amounted  for  the  year  to  $3,210,642,970. 

Figuring  that  ocean  freight  and  insurance  amounts  to  3^  per  cent 
of  the  value  of  imports,  this  country  paid  foreigners  during  the  fiscal 
year  1911,  $45,132,870  on  commerce  for  the  United  States  carried  in 
foreign  ships.  Putting  the  like  charge  on  our  bulkier  exports  at  5|  per 
cent  of  their  value,  foreigners  earned  and  Americans  lost  $90,250,926 
on  the  ocean  carriage  of  American  products  shipped  abroad  in  foreign 
bottoms. 

As  a people  we  pay  the  freight  cost  on  imports  in  foreign  ships. 
We  merely  do  not  earn  the  possible  transportation  earnings  on 
exports  made  in  foreign  ships.  American  shipowners  earned,  during 
the  fiscal  year  1911  on  the  basis  of  computation  just  used,  $5,132,432 
on  the  transportation  of  imports  to  the  United  States,  and  on  exports, 
$6,346,105.  Thus  the  sea-borne  foreign  commerce  of  the  country 
paid  American  shipowners  about  $11,500,000  in  a year,  while  it 
yielded  to  foreign  shipowners  some  $135,500,000  during  the  same 
period. 

Events  have  proved  that  under  present  conditions  American 
built  and  manned  ships  can  not  profitably  compete  with  foreign 
ships.  Statistics  demonstrate  how  American  merchant  ships  have 
been  gradually  driven  out  of  international  trade.  On  June  30,  1911, 
the  aggregate  gross  tonnage  of  American  ships  in  foreign  trade  was 
only  863,495  tons,  or  11.3  per  cent  of  the  total  gross  tonnage  of  the 
entire  American  merchant  marine,  the  great  bulk  of  which  was 
engaged  in  coastwise  and  Great  Lakes  trade  between  American  ports. 
From  this  trade  foreign  ships  are  excluded  by  Federal  law. 

Gross  tonnage  of  American  vessels  engaged  in  foreign  trade  in  1884 
was  1,276,972  tons.  Since  then  the  American  merchant  marine 
has  grown  from  4,271,229  tons  to  7,638,790,  but  that  part  of  it  in 
foreign  trade  has  decreased  by  nearly  one-third.  In  1861  American 
ships  in  foreign  trade  had  an  aggregate  tonnage  of  2,496,894  tons, 
almost  three  times  as  much  as  now. 

Back  in  the  seventies  American  ships  carried  more  than  30  per 
cent  of  the  imports  to  the  United  States.  The  largest  proportion 
in  any  year  since  the  Civil  War  was  33.1  per  cent  in  1870.  For 
1911  it  was  only  10.2  per  cent.  Of  our  export  trade  for  that  year, 
only  7.5  per  cent  was  done  in  American  ships.  In  1867  American 


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PANAMA  CANAL  AND  AMERICAN  MERCHANT  MARINE. 


5 


vessels  carried  39.2  per  cent  of  our  ocean-borne  exports.  Of  the 
total  import  and  export  trade  for  1911  American  vessels  handled 
only  8.7  per  cent.  In  1870  they  carried  35.6  per  cent  of  such  trade. 

Various  conditions  are  adverse  to  the  American  merchant  marine. 
British  and  German  built  steamships  cost  no  more  than  two-thirds 
as  much  as  ships  constructed  in  American  yards.  The  Atlantic 
Transport  Line  steamer  Maine,  built  at  Sparrows  Point,  Md.,  cost 
$1,010,135,  while  her  identical  sister  ship,  the  Michigan,  built  in  Eng- 
land, cost  $647,640.  It  costs  more  to  operate  ships  American  manned. 
Four  years  ago  a congressional  committee  obtained  some  actual 
figures.  These  showed  that  the  salary  and  wage  cost  of  running  the 
St.  Louis  for  a month  was  $11,306,  or  97  cents  per  gross  ton;  of  the 
Oceanic,  $9,891,  or  57  cents  per  ton,  and  of  the  Kaiser  Wilhelm  der 
Grosse,  $7,716,  or  54  cents  per  ton. 

For  ships  in  the  West  Indies  trade  there  was  less  disparity,  the 
salary  and  wage  cost  of  a German  ship  being  90  per  cent  that  of 
an  American  ship.  In  such  trade  foreign  ships  must  more  nearly 
pay  American  seamen’s  wages.  In  the  trans-Pacific  service  the 
monthly  wage  and  salary  cost  of  running  a fast  Japanese  passenger 
steamer  has  been  found  to  be  $4,247,  or  31  cents  per  gross  ton,  while 
that  for  a similar  American  ship,  employing  mainly  Chinese,  is 
$4,836,  or  43  cents  per  ton.  It  has  been  figured  that  such  a ship  as 
the  Lusitania,  built,  run,  and  maintained  as  an  American  vessel,  would 
cost  nearly  $1,000,000  more  per  annum  than  does  the  British  ship. 

No  wonder  American  enterprise  turns  from  competitive  operations 
on  the  high  seas.  The  building  and  running  of  ships  is  a business. 
Men  do  not  engage  in  obviously  losing  operations.  Under  the  con- 
ditions shown,  it  is  plain  why  American  ships  have  been  withdrawn 
from  international  trade.  They  can  not  pay.  Foreign  governments 
put  additional  handicaps  on  American  ships  by  contributing  directly 
and  largely  to  the  development  of  their  own  merchant  marines. 

My  subject  is  not  that  of  shipbuilding  bounties  or  of  subsidies  to 
American  steamship  lines,  but  as  to  how  the  Panama  Canal  can  be 
^employed  to  most  largely  benefit  the  American  people  and  to  best 
promote  their  interests  both  on  sea  and  land.  Yet  I am  compelled 
to  point  the  issue.  Foreign  nations  give  large  financial  support  and 
encouragement  to  their  merchant  marines.  Government  compiled 
figures  place  the  total  of  such  payments  of  $46,907,220  a year. 

Compare  this  huge  sum  with  the  paltry  $1,074,945  which  the  United 
States  paid  during  the  fiscal  year  1911  to  American  ships  for  mail 
service  m the  now  only  seven  American  routes.  W e paid  foreign  ships 
in  the  same  time  $2,129,654,  almost  twice  as  much.  Canada  paid 
$1,684,683  in  the  year  ended  March  31,  1909,  to  help  her  ship  lines. 

Great  Britain  pays  in  postal  and  admiralty  subventions  about 
$9,700,000  a year,  although  only  some  3 per  cent  of  British  shipping 
in  foreign  trade  shares  in  this  bounty.  Quietly  the  British  Govern- 
ment, as  owner  of  nearly  half  the  Suez  Canal  stock,  levies  a tribute 
on  world  commerce,  and  from  this  source  drew  into  its  treasury  for 
1910  $5,386,300. 

France  pays  graded  bounties  on  all  vessels  built  in  French  ship- 
yards besides  navigation  allowances  and  mail  subsidies,  in  all  about 
$13,425,000  a year.  The  other  European  nations  give  large  direct 
support  to  national  ocean  lines.  Japan  grants  shipbuilding  bounties 
of  $10  per  gross  ton  for  steel  steamships,  and  $2.50  for  each  horsepower 


6 


PANAMA  CANAL  AND  AMERICAN  MERCHANT  MARINE. 


developed  by  the  engines,  which  gives  about  $200,000  toward  con- 
struction cost  of  the  type  of  passenger  steamer  she  is  now  running  to 
San  Francisco. 

Japan  also  gives  mail  subsidies  and  navigation  bounties.  During 
the  fiscal  year  ended  March,  1909,  the  Japanese  Government  paid 
$6,183,000  in  aid  of  the  national  shipping.  Under  such  encourage- 
ment the  Japanese  merchant  fieet  grew  from  360,695  tons  in  1895 
to  1,288,053  tons  in  1909. 

Under  the  ocean  mail  act  of  1891,  the  United  States  post  office  pays 
to  American  built,  owned,  and  officered  line  ships  $4  per  mile  sailed 
by  steamers  of  8,000  tons  or  more,  with  a speed  of  20  knots;  $2  per 
mile  sailed  by  steamers  of  5,000  tons  or  more,  with  a speed  of  16 
knots;  $1  per  mile  to  2,500-ton  14-knot  ships;  and  67  cents  per  mile 
to  steel,  iron,  or  wooden  ships  of  not  less  than  1,500  tons  and  12  knots 
speed. 

All  sorts  of  ways  have  been  proposed  to  revive  the  American  mer- 
chant marine  and  to  restore  it  to  a position  of  vigor  and  strength  in 
international  commerce.  Nearly  every  plan  put  forward  has  been 
such  as  would  promote  special  interests.  The  Panama  Canal  will 
open  a way  to  encourage  all  American  shipping  without  discrimina- 
tion or  favor.  It  will  afford  a way  to  give  the  American  merchant 
marine  an  important  advantage  in  world  commerce. 

Sentiment  and  false  generosity  should  be  thrust  aside  by  the 
American  Nation  in  this  matter.  A national  business  policy  should 
be  inaugurated  with  the  opening  of  the  Panama  Canal.  This  huge 
project  will  be  purely  an  American  accomplishment.  The  American 
people  have  paid  all  the  cost;  they  must  maintain  and  operate  the 
canal  and,  under  these  circumstances,  they  have  a just  right  to  claim 
and  take  for  themselves  its  larger  benefits. 

Give  to  any  and  all  American  built  and  manned  ships  free  use  of 
the  Panama  Canal.  Levy  tolls  upon  all  foreign  vessels  availing  of 
the  great  waterway.  In  this  way  can  the  American  canal  promote 
American  interests.  Let  the  tolls  charged  foreign  ships  passing 
through  the  Panama  Canal  be,  say,  those  levied  by  the  Suez  Canal. 

That  waterway  is  owned  by  a company  and  is  under  the  virtyal 
control  of  the  British  Government  which,  since  1875,  has  owned 
176,602  of  the  379,421  shares  of  the  capital  stock,  acquired  at  a cost 
of  $19,855,320.  The  Suez  Canal  was  opened  in  1869.  It  is  103  miles 
long,  and  an  average  of  nearly  17  hours  is  required  for  passage 
through  it.  At  a cost  of  $19,300,000  the  canal  is  being  widened  to 
147.6  feet  and  deepened  to  36.1  feet,  the  present  depth  being  only 
28  feet.  The  Panama  Canal  will  carry  41  feet  of  water  and  have  a 
channel  from  300  to  1,000  feet  wide. 

Ships  will  pass  through  the  American  canal  in  10  to  11  hours.  It 
is  calculated  that  the  most  advantageous  handling  of  the  world’s 
present  commerce  will  route  through  the  Panama  Canal  the  first  year 
ships  to  an  aggregate  tonnage  of  8,328,000  net  tons.  That  would  be 
about  one-tenth  the  estimated  traffic  capacity  of  the  canal. 

During  1910  the  Suez  Canal  handled  4,533  vessels,  having  a total 
tonnage  of  16,581,898  net  tons.  Total  receipts  of  the  company  from 
its  canal  service  amounted  to  $25,168,400.  The  cost  of  operating  and 
and  maintaining  the  canal,  plus  appropriations  to  depreciation 
reserve,  was  $3,857,405.  Payments  for  fixed  charges  and  for  retiring 
capital  obligations  amounted  to  $6,072,602.  The  company  divided 


PANAMA  CANAL  AND  AMEKICAN  MEKCHANT  MAEINE. 


7 


a balance  of  profits  for  1910  of  $15,908,419,  paying  a dividend  of  31.6 
per  cent  to  its  stockholders.  Whenever  the  dividend  exceeds  25  per 
cent  the  Suez  Canal  tolls  are  reduced.  They  are  now  $1.30  per  net 
ton  on  ships  with  cargo,  and  82  cents  per  ton  on  ships  in  ballast,  and  a 
charge  of  $1.93  each  for  passengers  older  than  12  and  half  that  much 
for  those  younger,  children  under  3 going  free.  Up  to  the  end 
of  1910  the  cash  expenditure  on  the  Suez  Canal  amounted  to 
$126,642,406.  The  company  had  outstanding  capital  obligations  of 
$92,484,544. 

Freedom  of  American  ships  from  tolls  at  the  Panama  Canal  will 
also  enable  that  costly  national  undertaking  to  confer  the  largest 
measure  of  benefit  upon  the  people  of  the  United  States.  So  will 
it  be  possible  for  American  ships  to  transport  coast-to-coast  freight 
at  lowest  rates.  It  is  believed  that  general  cargo  goods  can  be  carried 
from  Philadelphia  to  San  Francisco  for  from  $5  to  $7  per  ton. 

Transcontinental  railroads  can  not  possibly  meet  such  rates.  Class 
freight  rates  from  Philadelphia  to  San  Francisco,  figured  to  tons,  are 
now  $60  for  first  class,  $52  for  second,  $44  for  third,  and  $38  for 
fourth  class.  Commodity  rates  are  lower,  but  in  no  case  less  than 
double  the  expected  Panama  route  ship  rates.  The  rate  on  steel  rails 
from  Bethlehem  to  San  Francisco  is  $14  per  ton. 

With  the  Panama  Canal,  made  free  to  American  ships, while  reason- 
able tolls  are  charged  foreign  vessels  using  it,  this  $375,000,000  work 
can  become  a means  of  restoring  the  American  merchant  marine  to 
its  rightful  place,  and  thus  save  to  the  American  Nation  tens  of  millions 
of  dollars  now  paid  foreign  shipowners  every  year  for  transporting 
American  commerce  and  also  of  reducing  the  delivery  cost  within 
the  United  States  of  all  kinds  of  goods  which  are  now  transported 
across  the  continent  by  rail. 

Objection  is  made  to  such  a policy.  It  is  the  violent  objection 
of  threatened  interests.  An  American  policy  for  the  Panama  Canal 
is  questioned  from  abroad,  attacked  at  home.  The  great  trans- 
continental railroad  interests  are  making  an  underhand  fight  to 
nullify,  as  far  as  possible,  the  benefits  which  should  accrue  to  the 
American  people  from  the  isthmian  waterway.  They  want  to  put  a 
burden  of  tolls  upon  American  commerce  through  the  canal  so  as  to 
make  the  freight  charges  as  high  as  possible. 

From  abroad  is  raised  the  contention  that  we  are  under  solemn 
treaty  obligations  not  to  use  our  American-built  canal  to  promote 
our  own  interests.  This  sly  appeal  to  honor  has  been  urged  with 
all  force  by  designing  interests.  Do  we  fear  the  hurt-trade  anger 
of  England,  of  Germany,  or  any  foreign  power?  Are  we  ready  to 
yield  the  greater  good  of  100,000,000  people  to  the  will  and  temporary 
interest  of  the  transcontinental  railroads?  Americans  will  answer: 
No,  never! 

Let  us  examine  this  jiroposition.  What  are  these  treaty  undertak- 
ings and  what  are  our  rights  ? 

By  the  Ilay-Pauncefote  treaty  of  November  18,  1901,  which  was 
promulgated  February  22,  1902,  it  was  agreed  between  the  United 
States  and  Great  Britain  that  the  Clayton-Bulwer  treaty  of  April  19, 
1850,  should  be  siqierseded  to  the  end  that  the  Panama  Canal  might 
be  constructed  “under  the  auspices  of  the  Government  of  the  United 
States,  without  impairing  the  ‘general  principle’  of  neutralization” 
laid  down  by  the  old  convention. 


8 PANAMA  CANAL  AND  AMERICAN  MERCHANT  MARINE. 

The  old  treaty  barred  the  United  States  from  ‘ ^ any  exclusive  control 
over”  any  isthmian  canal  or  railroad  which  might  ever  be  built,  and 
from  ^‘any  rights  or  advantages  in  regard  to  commerce  or  navigation 
through  the  said  canal  which  shall  not  be  offered  on  the  same  terms” 
to  Great  Britain.  The  two  nations  were  to  determine  what  ^‘charges 
or  conditions  of  traffic”  were  ‘‘just  and  equitable,”  and  undertook  to 
see  that  any  canal  should  ‘ ‘ be  open  on  like  terms  to  the  citizens  and 
subjects  ” of  all  nations  engaging  to  observe  and  protect  its  neutrality.  % 

iJnder  the  present  treaty  the  United  States  enjoys  “the  exclusive 
right  of  providing  for  the  regulation  and  management  of  the  canal.” 

Acting  upon  its  prime  right  it  “adopts,  as  the  basis  of  the  neutraliza- 
tion” of  the  Panama  Canal  substantially  the  rules  established  in  1888 
by  the  convention  of  Constantinople,  making  the  Suez  Canal  open  for 
the  passage  of  vessels  of  all  nations,  whether  merchant  or  armed  ships, 
in  times  of  war  as  well  as  of  peace. 

Thus  it  is  clear  that  the  great  actuating  purpose  of  the  Hay- 
Pauncefote  treaty  was  to  establish  over  the  Panama  Canal  for  all 
time  a condition  of  neutrality,  even  as  such  was  the  prime  object 
of  the  convention  of  Constantinople  with  respect  to  the  Suez  Canal. 

This  becomes  doubly  plain  in  the  fact  that  this  treaty  specifies  with 
exact  precision  the  duties  of  nations  to  observe  the  neutrality  of  the 
Panama  Canal  and  the  rights  of  war  vessels  of  a belligerent  nation 
when  within  the  canal  zone. 

Coming  to  the  point  at  issue,  the  United  States  has  undertaken  to 
see  that  the  Panama  Canal — 

shall  be  free  and  open  to  the  vessels  of  all  nations  on  terms  of  entire  equality,  so  that 
there  shall  be  no  discrimination  against  any  such  nation,  or  its  citizens  or  subjects,  in 
respect  to  the  conditions  or  charges  for  traffic,  or  otherwise. 

The  United  States  has  “the  exclusive  right”  to  determine  what 
these  conditions  and  charges  shall  be.  As  to  this  it  is  restricted  by 
the  treaty  only  to  the  extent  that  they  “shall  be  just  and  equitable,” 
but  as  to  this  no  other  nation  may  raise  question.  The  treaty  of 
November  18,  1903,  between  the  United  States  and  Panama,  under 
which  the  Canal  Zone  exists,  provides  that  no  costs  shall  be  im- 
posed on  vessels,  or  upon  the  cargoes,  crews,  or  passengers  of  vessels 
using  the  canal  “except  such  tolls  and  charges  as  may  be  imposed  by 
the  United  States  for  the  use  of  the  canal  and  other  works.”  Here 
again  our  authority  stands  forth. 

Existing  treaties,  read  in  the  light  of  that  which  stood  before,  clearly 
admit  the  right  of  the  United  States  to  construct,  control,  and  operate 
the  Panama  Canal  as  a neutral  waterway  open  to  the  commerce  of  the 
world  without  let  or  hindrance  from  any  other  nation.  Our  under- 
taking is  limited  to  an  obligation  not  to  discriminate  against  any 
nation,  nor  the  citizens  or  subjects  of  any  nation. 

In  this  regard  the  treaty  is  fairly  open  to  two  interpretations. 
Considering  what  Great  Britain  surrendered  when  she  agreed  to  the 
Hay-Pauncefote  treaty  to  supercede  the  Clayton-Bulwer  treaty,  it 
may  well  be  held  that  she  admits  the  sovereign  right  of  the  United  ^ 

States  with  regard  to  the  Panama  Canal.  From  this  I submit  that 
the  treaty  should  be  held  to  require  of  the  United  States  only  that 
there  shall  be  no  discrimination  in  Panama  Canal  charges  and  regula- 
tions as  between  foreign  nations  or  their  citizens  or  subjects. 

That  is  the  interpretation  I would  give  the  treaty.  Fulfilling  our 
clear  and  just  duty  to  other  nations  and  their  peoples,  which  is  ob- 
viously to  put  them  all  on  the  same  footing  in  the  use  of  the  Panama 


PANAMA  CANAL  AND  AMERICAN  MERCHANT  MARINE. 


9 


Canal,  the  tolls  and  other  regulations  must  be  on  a uniform  basis  for 
all  foreign  vessels.  To  American  ships  give  free  passage  through  the 
great  isthmian  waterway  which  will  exist  solely  through  the  enter- 
^ prise  and  at  the  cost  of  the  American  nation. 

Could  there  be  just  attack  upon  such  a stand?  Selfish  interest 
might  prompt  some  nation  to  cry  out  against  a toll  system  which 
would  give  to  the  American  people  a preferential  advantage  in  the 
« use  of  their  own  canal.  We  are  entitled  to  benefit  from  our  work. 
If  foreign  nations,  for  selfish  ends,  make  issue  on  the  treaty,  then  let 
the  American  nation  assert  itself. 

No  power  can  exceed  its  source.  The  power  which  makes  can 
unmake  a treaty.  In  1832  the  United  States  and  Russia  made  a 
treaty  which  provided  that  citizens  or  subjects  of  each  country 
might  enter  the  other  and  while  there  enjoy  all  the  security  and 
protection  accorded  to  natives.  There  was  a plausible  basis  for  the 
contention  of  Russia  that  Jews,  citizens  of  the  United  States,  should 
not  travel  freely  in  Russia,  because  Jews,  subjects  of  that  country, 
were  restricted  in  their  movements. 

None  the  less  the  American  nation  refused  to  tolerate  any  abridge- 
ment of  the  personal  rights  of  her  citizens  abroad.  What  was  done 
is  recent  history.  Acting  on  a terminating  clause,  President  Taft, 
on  December  17,  1911,  gave  notice  that  at  the  end  of  this  year  the 
Russian  treaty  would  stand  abrogated.  Congress  ratified  this  action 
by  resolution  passed  by  the  Senate  December  19,  by  the  House  next 
day,  and  signed  by  the  President  on  December  21. 

The  Constitution  of  the  United  States  provides  that  the  President 

shall  have  power,  by  and  with  the  advice  and  consent  of  the  Senate, 
to  make  treaties, and  that  Congress  shall  have  power  to  provide 
for  the  general  welfare  of  the  United  States.’’  If  necessary  for  the 
general  welfare  the  President  and  Congress  can  annul  or  amend  the 
Hay-Pauncefote  treaty. 

While  it  exists,  we  must,  as  an  honorable  nation,  observe  it,  even 
should  it  be  interpreted  by  foreign  nations  to  bar  the  United  States 
from  allowing  American  ships  a free  passage  of  the  Panama  Canal 
while  charging  tolls  to  foreign  vessels.  It  is  probable  that  this 
interpretation  will  be  put  upon  the  treaty.  Even  so,  the  situation 
thus  forced  is  not  such  as  need  rob  us  of  the  fullest  benefits  from 
our  isthmian  waterway. 

In  fact,  it  would  interpose  no  serious  obstacles  in  the  way  of  our 
getting  such  benefits.  The  hands  of  the  American  people  are  not 
tied  by  any  treaty  in  such  way  as  to  leave  them  helpless  in  this 
situation.  We  can  in  such  case  collect  tolls  from  all  vessels  using  the 
canal  on  precisely  the  same  basis,  and  then  distribute  back  to  those 
American  shipowners  whose  vessels  had  used  the  canal  the  tolls 
which  such  vessels  had  paid,  doing  this  in  the  form  of  subsidies  paid 
pro  rata  as  were  the  canal  tolls  collected. 

Tliere  can  be  no  question  that  we  have  an  assured  right  to  allow 
free  passage  of  the  canal  by  all  those  American  vessels  which  are 
engaged  in  our  coastwise  and  domestic  trade,  sailing  between  ports 
of  the  United  States,  or  to  and  from  its  island  possessions,  Hawaii, 
Porto  Rico,  and  the  Philippines.  To  this  no  tenable  objection  can 
be  interposed.  In  the  operation  of  the  Panama  Canal  we  undertake 
that  there  shall  be  no  discrimination  as  between  nations. 

Under  our  navigation  laws,  whicli  existed  when  the  Hay-Pauncefote 
treaty  was  made,  foreign  vessels  are  prohibited  from  engaging  in 


10 


PANAMA  CANAL  AND  AMERICAN  MERCHANT  MARINE. 


trade  between  American  ports.  Thus  in  making  the  Panama  Canal 
free  to  passage  by  American  vessels  engaged  in  such  trade  there  can 
be  no  discrimination,  for  they  run  in  competition  with  no  foreign 
vessels. 

If  there  is  any  bar  in  the  treaty,  let  the  United  States  frankly  take 
the  position  that,  observing  a possible,  although  questionable,  obli- 
gation to  charge  American  ships  engaged  in  foreign  trade  the  same 
tolls  for  using  the  American  isthmian  canal  that  foreign  vessels  are  ' 
charged,  that  all  American  vessels  in  domestic  trade  shall  go  free; 
that  as  to  this  we  will  no  more  tolerate  outside  interference  than  we 
would  permit  a foreign  nation  to  meddle  with  our  internal  commerce, 
and  further,  that  through  subsidies,  which  Congress  has  a no  less 
inalienable  right  to  mafo  in  any  form  it  may  see  fit  than  it  has  to 
appropriate  moneys  for  coast  defense  or  river  and  harbor  improve- 
ment, all  toll  money  collected  at  the  canal  on  American  ships  shall 
revert  back  to  the  owners  of  those  particular  ships. 

Let  the  American  nation  be  perfectly  frank  and  absolutely  firm 
in  declaring  such  purpose.  Could  Great  Britain,  a signatory  power 
to  the  Hay-Pauncefote  treaty,  object  ? Not  with  any  sincerity  or 
with  much  force  of  argument  in  view  of  the  fact  that  she  pays 
annually  to  the  Peninsular  & Oriental  Steamship  Co.  subsidies  approx- 
imating the  Suez  Canal  tolls  paid  by  that  great  British  line.  Thus 
for  1907  the  canal  tolls  aggregated  £333,000.  the  subsidies  £332,784; 
for  1910  such  tolls  were  £357  989.  the  subsidies  £297,143. 

Again,  what  objection  could  Germany  urge?  To  the  North  Ger- 
man Lloyd  Line  to  the  Orient  there  was  paid  during  1910  a Govern- 
ment subsidy  of  SI, 385, 160,  which  sufficed  much  more  than  to  pay 
the  Suez  Canal  tolls  of  the  company’s  fleet.  Next,  take  France,  whose 
subsidies  for  1908  to  the  three  chief  French  lines  via  the  Suez  Canal 
amounted  to  $2,145,232.  This  cash  aid  paid  the  canal  tolls  three  times 
over. 

For  the  fiscal  year  ended  March  31,  1909,  the  Japanese  Govern- 
ment paid  $1,336,947  as  a subsidy  to  the  steamship  line  operating  to 
Europe  through  the  Suez,  equal  to  about  two  and  one-half  times  the 
canal  tolls.  These  refunds  of  the  Suez  Canal  tolls  may  be  accounted 
indirect.  The  Austrian-Lloyd  Steamship  Co.  is  operating  under  a 
15  years’  agreement  by  which  the  Government  undertakes  to  make 
up  to  the  company  annually  its  Suez  Canal  tolls,  about  $375,000  a year. 

Russia  pays  the  canal  tolls  of  the  Russian  Volunteer  Fleet,  not  only 
the  tonnage  charges  but  the  passenger  tolls.  For  1909  she  so  paid 
$334,750.  Sweden  subsidizes  her  regular  steamship  line  to  the 
Orient,  on  the  basis  of  the  canal  tolls,  about  $100  000  a year.  It  is 
closely  figured  that  one-fourth  of  the  steamship  tolls  paid  to  the 
Suez  Canal  Co.  during  1910  were  reimbursed  to  steamship  companies  ' 

out  of  the  treasuries  of  the  nations  whose  flags  they  carried. 

Thus  have  we  abundant  precedent  to  subsidize  American  ships 
using  the  Panama  Canal,  to  the  amount  of  the  tolls  they  pay.  Should 
any  foreign  nation  maintain  that  under  the  Hay-Pauncefote  treaty  t 
the  United  States  is  in  honor  bound  to  charge  American  ships  engaged 
in  foreign  trade  like  tolls  to  those  demanded  from  foreign  vessels, 
then  let  us  boldly  announce  a determination  to  so  act  as  to  protect 
our  own. 

Almost  as  his  last  public  thought  William  P.  Frye,  long  a Senator 
from  Maine,  proposed  a bill  to  this  end.  It  provided  that  all  tolls  and 
transit  charges  which  may  hereafter  be  imposed”  on  American  vessels 


PANAMA  CANAL  AND  AMEKICAN  MEECHANT  MARINE. 


11 


“passing  through  the  Panama  Canal  shall  be  paid’’  by  the  United 
States  and  “shall  be  deemed  permanent  annual  appropriations.” 

Urging  this  treatment  of  the  problem,  Eugene  T.  Chamberlain, 
A United  States  Commissioner  of  Navigation,  in  his  latest  annual  report, 
says  of  the  Frye  bill : 

It  is  consistent  with  the  most  scrupulous  respect  for  our  treaty  obligations;  it  accords 
with  the  accepted  and  successful  practice  of  maritime  nations,  and  it  applies  to  the 
^ Panama  Canal  the  same  rule  of  untaxed  American  navigation  which  we  have  applied 

for  a quarter  of  a century  to  the  navigation  of  every  river,  harbor,  and  lake  deemed 
worthy  of  the  consideration  of  Congress. 

Americans  have  never  accepted  the  English  brand  of  political 
economy.  As  taught  by  the  British  school  it  was  indeed  a “dismal 
science.”  When  we  broke  in  a new  country,  the  old  laissez-faire 
theory  crashed  by  the  wayside  of  progress.  The  American  school  of 
economics  holds  high  the  rights  of  men  to  live  and  prosper,  demands 
of  government  policies  such  as  will  promote  enterprise  while  protect- 
ing the  weak  against  the  strong,  such  as  will  develop  every  home 
industry  that  has  economic  right  to  exist,  such  as  will  increase  the 
general  welfare  of  the  country,  advance  every  just  interest  of  the 
nation. 

Thus  should  it  be  the  national  policy  to  maintain  a true  economic 
protective  tariff  system,  such  as  Henry  C.  Carey  might  rise  from  his 
grave  and  put  his  noble  blessing  upon.  Standing  upon  the  proposi- 
tion that  America  should  be  industrially  and  financially,  as  well  as 
nationally  free,  and  holding  that  she  can  not  enjoy  her  rightful  m.eas- 
ure  of  independence  except  she  is,  I ask: 

Is  our  Government  to  withhold  honest  protection  to  Am.erican  men 
and  American  capital  employed  on  the  high  seas  ? Can  we,  as  a na- 
tion, afford  to  pay  tribute  to  foreign  shipowners  of  $135,500,000 
annually  for  the  ocean  carriage  of  American  commerce  with  the  world  ? 
Ponder  well  these  questions! 

With  liberal,  and  in  the  main,  wise  hand  our  Government  has  ex- 
pended since  1884  $527,000,000  for  river  and  harbor  improvement. 
For  the  Panama  Canal  we  will  have  expended  $375,000,000.  Last 
year  foreign  shipowners  earned  as  freight  money  for  the  carriage  of 
American  commerce  a sum  equal  to  one-third  the  total  cost  of  this 
huge  project. 

Think  of  it!  Thus  are  we  under  a tribute  that  is  ever  sapping  our 
wealth  and  helping  to  swell  the  burden  of  foreign  debt,  now  amount- 
ing to  $6,600,000,000,  which  rests  upon  us  as  a people.  Here  is  an 
economic  condition  which  demands  serious  attention,  a financial  prop- 
osition which  calls  for  correcting  action. 

It  has  been  seriously  proposed  that  foreign-built  ships  bought  and 
owned  wholly  by  citizens  of  the  United  States  or  by  American  corpo- 
rations, shall  be  admitted  to  American  registry,  to  engage  only  in  for- 
eign trade.  This  nation,  in  the  courage  of  youth  laid  it  down  in  1792 
as  the  American  policy  that  the  American  flag  should  fly  over  no  for- 
eign built  or  owned  ship,  unless  a prize  of  war. 

We  have  maintained  this  policy.  By  the  tariff  of  1909  duties  on 
all  foreign  materials  used  in  construction  of  American-built  ships 
are  rebated  where  such  ships  do  not  ply  in  the  preempted  coastwise 
trade  more  than  six  months  a year.  Steel  for  shipbuilding  now  costs 
no  more  in  American  than  in  English  shipyards. 

The  higher  cost  of  building  American  ships  results  from  much 
higher  labor,  from  lack  of  merchant  marine  work  sufficient  to  keep 


12 


PANAMA  CANAL  AND  AMERICAN  MERCHANT  MARINE. 


the  yards  busy  to  capacity  and  to  enable  a standardization  of  con- 
struction. American  registry  of  foreign  ships  for  foreign  trade  would 
cut  off  a prospect  for  larger  shipbuilding  activity  in  this  country. 
It  is  strongly  opposed  by  shipbuilding  interests. 

But  free  ships  would  not  suffice.  American  labor  costs  as 
much  more  as  American  ships.  So  might  ‘^free  crews’’  be  proposed 
with  equal  justice.  Then  would  we  have  not  an  American  merchant 
marine,  but  a foreign  merchant  marine  masquerading  under  the 
American  flag.  This  would  fail  in  the  prime  purpose.  We,  as  a 
people,  would  not  earn  the  freight  money,  except  as  to  the  smaller 
share  left  as  profit  for  the  shipowners,  and  so,  having  first  surrendered 
the  right  to  profit  in  the  building  and  operating  of  such  ships,  we 
Americans  could  not  reap  the  great  benefit  which  would  accrue  to  us 
from  a real  American-built,  American-manned  merchant  marine. 

Right  use  of  the  Panama  Canal  will  result  in  large  direct  and 
greater  indirect  benefit  to  the  American  people.  It  can  be  the  means 
of  overcoming  some  of  the  influences  which  have  worked  to  destroy 
the  American  merchant  marine  and  so  of  extending  in  proper  way 
needed  aid  to  those  who  would  carry  the  American  flag  on  the  peace- 
ful missions  of  commerce  to  the  ports  of  the  world,  and  particularly 
to  those  of  sister  American  Republics. 

With  such  accomplished,  we  will  be  in  the  way  of  clearing  off  that 
financial  burden  which  now  crushes  down  upon  us  from  foreign 
creditors,  absorbing  every  year  all  that  we,  as  a people,  can  spare  to 
the  world  and  leaving  us  ever  deeper  in  debt.  International  trade 
conforms  to  the  facilities  for  its  doing.  As  a nation  we  are  bare  of 
these.  We  lack  ships,  we  lack  financial  arrangements  to  make  easy 
the  flow  of  international  commerce. 

Thus  it  is  that  Germany,  England,  and  even  Spain,  are  supplying 
South  American  countries  with  the  bulk  of  what  they  import.  Spain 
has  authorized  an  annual  subsidy  of  $285,000  to  a new  steamship 
line  to  run  through  the  Panama  Canal  to  Valparaiso.  Our  commerce 
with  South  American  peoples  runs  heavily  against  us — $148,750,087 
for  the  fiscal  year  1910. 

Immediately  before  us  lies  a great  opportunity.  Grasp  it  and 
American  interests  will  prosper.  Let  it  pass  and  we  shall  rue  the 
day  that  American  enterprise  undertook  the  Panama  Canal.  Our 
right  course  is  plain.  It  is  to  turn  the  isthmian  waterway  to  our 
full  account  by  so  using  it  as  to  foster  American  shipping  by  accord- 
ing in  one  way  or  another  free  passage  for  American  ships. 

That  will  strengthen  our  national  position.  It  will  stimulate 
American  shipbuilding.  It  will  open  to  American  manufacturers  and 
merchants  new  markets.  It  will  promote  our  commerce  with  South 
^ America.  It  will  cut  down  the  enormous  tribute  we  are  under  to 
^ foreign  shipowners.  It  will  bring  our  two  seaboards  into  closer 
economic  relationship.  It  will  reduce  present  transportation  costs 
between  Atlantic  and  Pacific  States,  thus  facilitating  the  interchange 
of  their  different  products.  It  will  promote  the  general  welfare  of 
our  whole  people. 

Let  us  realize  these  possibilities;  they  are  easily  within  reach,  and 
the  cost  of  the  Panama  Canal,  great  as  it  is,  will  sink  into  insignifi- 
cance when  measured  by  results. 


o 


